Zakhidenergo and Dniproenergo Report Preliminary 2007 Results

Zakhidenergo and Dniproenergo Report Preliminary 2007 Results.
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                                                   Sales          EBITDA             Net Income
Company                                 2007  yoy  2007   yoy margin  2007  yoy margin
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Dniproenergo (DNEN: HOLD)   758.0  38%  79.6  23.3  10.5%  24.1  22.1  3.2%
Zakhidenergo (ZAEN: HOLD)   715.8  16%  45.9   2.9   6.4%   9.9   5.4  1.4%
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Note: financials are stated in USD
Alexander Paraschiy: Both companies exceeded our sales forecasts (Dniproenergo by 5% and Zakhidenergo by 3%), mainly due to higher electricity production volumes over the last two months of 2007. Both companies showed lower 2007 EBITDA than we forecasted, thanks to a higher increase in coal prices than we expected and relatively low tariff adjustments in October and November 2007. We expect both generation companies to show higher profitability in the year 2008 on the back of the increase in electricity tariffs for GenCos in December 2007 and on Ministry of Fuel and Energy’s forecasts that the price of wholesale electricity will rise 28% YTD over 2008.